• If you are wondering whether Interactive Brokers Group is priced attractively today, this article will walk through what the current share price could mean for long term investors.
• The stock recently closed at US$74.90, with returns of a 1.9% decline over 7 days, 2.1% over 30 days, 11.4% year to date and 29.5% over the past year, while the three year return is around 3.5x and the five year return is just over 4x.
• Recent headlines around Interactive Brokers Group have focused on its position as a major electronic trading platform provider and its role in global market access for individual and institutional clients. These themes help frame how the market might be thinking about growth potential and risk when assigning a price to the stock.
• The company currently has a valuation score of 0 out of 6. Next we will break down what different valuation approaches say about the shares and finish by looking at a more comprehensive way to think about value beyond a single score.

Interactive Brokers Group scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Interactive Brokers Group Excess Returns Analysis

The Excess Returns model looks at how much profit a company is expected to generate above the return that shareholders require, based on its equity cost. Instead of focusing on cash flows, it concentrates on earnings power relative to the capital invested in the business.

For Interactive Brokers Group, book value is $12.04 per share and stable earnings per share are estimated at $1.86, based on the median return on equity from the past 5 years. The average return on equity is 20.52%, compared with a cost of equity of $0.75 per share. That gap translates into an excess return of $1.11 per share, which is what this model values over time.

The model also uses a stable book value of $9.05 per share, again tied to the median book value from the past 5 years, to project how these excess returns could compound. Putting this together, the Excess Returns valuation arrives at an intrinsic value of about $31.73 per share.

Against the recent share price of $74.90, this implies the stock is 136.0% overvalued according to this framework.

Result: OVERVALUED

Our Excess Returns analysis suggests Interactive Brokers Group may be overvalued by 136.0%. Discover 53 high quality undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Interactive Brokers Group Price vs Earnings

For a profitable company, the P/E ratio is a useful way to gauge how much you are paying for each dollar of earnings. It helps you compare the market’s expectations for one business with others that have similar business models.

What counts as a normal or fair P/E often reflects two things: how quickly earnings are expected to grow and how risky those earnings are. Higher growth and lower perceived risk can justify a higher P/E, while slower growth or higher risk usually calls for a lower one.

Interactive Brokers Group currently trades on a P/E of 33.9x. That sits above the Capital Markets industry average P/E of 23.23x and the peer average of 22.83x. Simply Wall St’s Fair Ratio for the stock is 22.05x. This is its view of the P/E you might expect given factors such as earnings growth, profit margins, risks, industry and market cap.

This Fair Ratio can be more useful than a simple peer or industry comparison because it adjusts for company specific traits rather than treating all Capital Markets firms as identical. With the current P/E of 33.9x sitting well above the Fair Ratio of 22.05x, the shares screen as expensive on this measure.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Interactive Brokers Group Narrative

Earlier we mentioned that there is an even better way to understand valuation. On Simply Wall St you can use Narratives on the Community page to link your view of Interactive Brokers Group’s story to specific assumptions for future revenue, earnings, margins and a Fair Value. You can then compare that Fair Value to today’s price and see it update automatically as new news or earnings arrive. One investor might create a cautious Interactive Brokers Group Narrative that aligns with a lower Fair Value of about US$15.08 per share, while another might build a confident Narrative closer to the higher Fair Value of about US$85.00, each grounded in their own expectations but using the same clear framework.

For Interactive Brokers Group however we will make it really easy for you with previews of two leading Interactive Brokers Group Narratives:

Fair value in this narrative: US$80.33 per share

Current price compared with this fair value: around 6.8% below the narrative fair value

Revenue growth assumption: 11.05% a year

• Focuses on global product rollouts and new markets, with items such as securities lending in new regions, expanded advisor tools, and partnerships like HSBC WorldTrader expected to support higher activity on the platform.
• Emphasises record client balances of US$107.1b and strong new account additions as signals of customer trust and a larger base that could support commissions, net interest income, and fees over time.
• Highlights both the upside from analyst targets around US$195.80 and the risks from competition, dependence on trading volumes, expansion execution, and interest rate changes, and encourages readers to test those assumptions against their own view.

Fair value in this narrative: US$15.08 per share

Current price compared with this fair value: around 397% above the narrative fair value

Revenue growth assumption: 6.28% a year

• Points out that recent quarters show very high profitability metrics, with pre tax margins around 79%, and argues that such levels may be difficult to sustain if costs or market conditions change.
• Flags reliance on trading activity and net interest income as key sensitivities, where quieter markets or lower interest rates could weigh on commissions and income from client balances.
• Raises questions about long term competition from low cost brokers, retail trading apps, and crypto or tokenization platforms, and whether current efficiency and reach fully justify a large premium over this narrative fair value.

Do you think there's more to the story for Interactive Brokers Group? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.